Public infrastructure and the performance of manufacturing industries: short-and long-run

Author:

Moreno Serrano, Rosina; Artís Ortuño, Manuel; López-Bazo, Enrique

Other authors:

Universitat de Barcelona

Abstract:

We present a theoretical framework for determining the short- and long-run effects of infrastructure. While the short-run effects have been the focus of most previous studies, here we derive long-run elasticities by taking into account the adjustment of quasi-fixed inputs to their optimum levels. By considering the impact of infrastructure on private investment decisions, we observe how, apart from the direct effect on costs in the short-run, infrastructure exerts an indirect source of influence in the long-run through their effect on private capital. The model is applied to manufacturing industries in the Spanish regions